#learjet85

In a light business jet market segment operate under Learjet brand with models 70/75 successors of 40/45 models. Bombardier entered light market segment by Learjet acquisition in 1990. Production and R&D is maintained in original Learjet factory in Wichita, Kansas.

In mid-size business jet segment Bombardier is particularly strong with legendary Challenger models 300 and 605, now under upgrade to models 350 and 650. Series 300 was designed and manufactured by Learjet factory in Kansas. Series 600 is acquired with acquisition of Canadair (in 1986) and was originally developed as LearStar 600 by Bill Lear (founder of Learjet).

In heavy jets segment Bombardier is one of leaders with Global models 5000 and 6000 (and 7000/8000 under development). Original Global (XRS) was business variant of regional commercial jet DB-700 (upgrade of smaller DB-200 made on Challenger 600 platform).

In commercial aviation Bombardier entered by acquisition of de Havilland and Dash-8 model now offered as regional turboprop Q400. In regional jet segment Bombardier entered by acquisition of Canadair with models Canadair Regional Jet CRJ-100/200 (DB-100/200 based on Series 600 platform) and now offer upgraded models DB-700 as CRJ-700/900/1000.

For Bombardier, Learjet is not ‘yet another factory’.

During the last decade and especially during economic downturn 2008-2012, business aviation was heavily influenced by demand from Middle East, Asia (China) and Russia (ex-SSSR). By demand I mean high net worth individuals that love big, expensive toys. Light business jet segment suffered the most and manufacturers lucky enough to compete in higher market segment survived.

New management take over Bombardier in 2008 with big plans to enter on new market segments. New Global, new CSeries and new Learjet.

First of 3 key development goals was based on more intensive Global development. Models 5000 and 6000 was soon realised with aggressive schedule to deliver models 7000 and 8000. Second key goal was development of commercial CSeries with 110 and 130 seats to compete with Boeing 737 and Airbus 320. Based on high demand in emerging markets in Asia, Russia and Latin America; but also on success of CRJ regional jets in up to 100 seats market segment. Third key goal was development of new composite Learjet as platform for all future Bomardier airplanes. For rest of the portfolio key strategy was facelift - basically upgrade to new engines and avionics and fancy interior. Challenger series 600 (now on 35 years old platform) to be upgraded on 650, series 300 to 350, Learjet 40/45 to upgrade on 70/75 and Dash-8 to Q400.

New Learjet is a band new, clear sheet design, biggest Learjet to date. Based on newest high-end technology it is first all composite aircraft from Bombardier. Composite will make it light and durable and will fly higher and faster with dramatically less fuel consumption. Yet, production was planned to be in new factory in Mexico. Rumours are that location high altitude and thin air caused problems with squeezing air out of carbon fibre layers. Technology have to be changed to autoclave based on a dry nitrogen that caused further delays in development.

For a new Global models Bombardier have signed 2 biggest ever contracts in business aviation with Netjets and Vistajet. Total value of $14 billions for firm orders and options. But, when legendary investor Warren Buffett is buying during biggest economic crisis ever - we can’t imagine discount he negotiated. Profitability of the program is under heavy pressure and R&D investment is strictly limited. Expected delivery schedule on other hand is putting additional pressure on development speed (read: cost). Margin for error is set extremely tight. But higher development cost of Global program is nothing compared with CSeries difficulties and delays. It cost not only more than expected but burn cash beyond any control.

As result, Bombardier run out of money.

According to cash flow analysis Bombardier on start of 2015 need $2 billions for financing operations. During 2014 cash was on $1.2 to $1.4 billions. In January 2015 is $800 millions. Another cost cut is on the way. First victim is Learjet 85. Even during development there was financing problems but this time is ended for good. Investment of $1.4 billion is written-off in Q4 2014, no matter technology and patents will be used for other projects. Ley-off for more than 1000 workers in Kansas and Mexico as addition to 1700 from early 2014 and 1800 from mid 2014.

Since 2008 under new management Bombardier shares dropped by 70%. In last 4 days, after Learjet 85 development canceled - down 40%. That’s how difficult situation for Bombardier is. But, don’t worry. Bombardier is too big for Canadian economy to fail. Government of Canada will step in, as before, to save Bombardier.